Equinix Inc.

The stable outlook reflects our belief that management is committed to maintaining the financial discipline associated with an investment-grade rating by funding expansion with a balanced mix of debt and equity, such that leverage does not rise from current pro-forma levels. Our current assessment can tolerate minimal FOCF generation over the near term so long as we believe expansion remains strategic and profitable. We could lower the rating if the company pursues debt-financed acquisitions or expansion projects, such that lease-adjusted net leverage remains above 4.25x and FFO to debt falls below 15% for a sustained period. Although less likely, we could lower the rating if there are material deficits in FOCF stemming from elevated churn, lower utilization, and lower EBITDA

...Equinix benefits from being by far the world's largest retail colocation provider in an industry in which scale matters. The company's scale attracts large cloud providers, telecom carriers, multinational enterprises, financial service firms, and content companies that would like to rent space in multiple facilities around the globe. For example, 86% of Equinix's customers rent space in multiple markets with 60% in all three regions (Americas, EMEA, and APAC). This type of customer base encourages interconnection services (where networks are created for the exchange of data traffic, including carriers, cloud providers, and enterprises) that create a virtuous demand cycle....

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